Walrasian Foundations for Equilibria in Segmented Markets
19 Pages Posted: 16 Oct 2013
Date Written: October 15, 2013
Abstract
We study an economy with segmented financial markets and strategic arbitrageurs who link these markets. We show that the equilibrium of the arbitraged economy is asymptotically Walrasian in the sense that it converges to the equilibrium of an appropriately defined competitive economy with no arbitrageurs. This characterization serves to clarify the role that arbitrageurs play in integrating markets.
Keywords: Segmented markets, arbitrage, restricted participation
JEL Classification: D52, G10
Suggested Citation: Suggested Citation
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